Calif. Pizza Kitchen Not Ready Yet - Analyst Blog
California Pizza Kitchen, Inc. (
CPKI) owns and operates a chain of 243 restaurants, of which 203 are company-owned and 40 operate under franchise or license agreements in 30 states and eight foreign countries.
We expect California Pizza Kitchen to continue suffering declining traffic, deleveraging of its rent expense, and shrinking ROEs (returns on equity) well into the 2nd half of 2009. However, we expect CPKI to rebuild momentum in 2010 (primarily through unit growth), grow earnings at a mid-teens average rate over the next five years by adding full service restaurants in existing and new markets (at a rate of about 8%-10% annually), increasing comps (we estimate +3% beginning in 2010) and restaurant margins through its new prototype restaurant design, repurchasing shares, and building its lucrative
Kraft (
KFT) frozen pizza licensing business.
Nevertheless, we expect earnings to deteriorate for at least two quarters with renewed growth dependent on the economy, to which there is no visibility.
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